FEATURED STOCKS - OCTOBER 2011Copper is used whenever possible simply because of the difference in...

As we continue to navigate through a very difficult period, we all agree companies that continuously increase their dividends and maintain huge cash reserves are the least volatile to hold in a portfolio for the foreseeable future. With the economy stalling, identifying high quality businesses that can deliver sustainable growth is harder than ever. Last month we featured many in our investment letter, and we will continue to showcase this strategy, but at the same time try to feature other ways to build, grow, and promote prosperity. Generally speaking, volatility creates buying opportunities, and I believe we are in one of these situations. One of our criteria for quality investment is searching for companies that have lower than average price earnings ratio. �� on the street that is selling below the market average - thus we’ve found one that is discounted or on sale. Stocks that �� their future growth projections will exceed the P/E, are heavily discounted. Simply said their growth rate exceeds their P/E. �� they pay no dividend, they have been in this position for quite some time. With a P/E around 15 and a growth rate projected to exceed 20 percent annually, one would and should add this to their portfolio. Although there are no guarantees, their iPhone 5 being introduced next week should add additional revenue to their

EXCEPTIONAL VALUES By Donald Pearson

FEATURED STOCKS - OCTOBER 2011

Value Stocks: Value Stocks:Avon Philip MorrisCSX Corp TargetDisney Walmart

Growth Stocks:Waters CorpZix Corp

ChairmanWalter D. Pearson Donald E. Pearson

President Ann Hathaway

Account Manager

bottom line that currently exceeds 70 billion dollars. Two other investments we believe enhance portfolios today, but do not yield, are gold and silver. These can be bought as ETFs, and one does not have to actually hold the bars at home. Smaller accounts might consider one or the other. Here is a brief description of both. GLD was introduced in 2004 and became an instant success. One could now own gold without having to provide the security necessary to maintain the investment safely. This is a paper purchase only without the hassle of taking physical delivery and having to vault your holdings. Thus, you’re without storage fees, possible theft, dealer markups, and a host of other possible costs. GLD is priced at one tenth the actual price of gold and the actual inventory is stored in England. Although gold or GLD captures all of the headlines, I prefer silver (SLV) as a single investment. It has increased considerably more in value over the last three years, and it continues to become a commodity sought after every day as a product used within other products. For example: Hybrid vehicles continue to increase in demand, as these gas/electric battery-charged vehicles are now receiving 50 plus miles per gallon. Toyota’s Prius has become a common sight on the road today, and Honda and other car manufacturers are beginning to introduce their hybrid lines. Silver is needed within their product mix. Usage within the technology and medical ��

additional needs, and this is what sets it apart from gold. One is used as a currency protection piece, while the other metal has other uses and will continue to spark demand as the need accelerates. Silver has unique properties which make it superior to any other substance. It is also the best conductor of electricity. This means that electricity travels faster while less of it is lost with silver as the conductor. Copper is used whenever possible simply because of the difference in cost, but silver is needed in many products and cannot be substituted. We featured GLD in February of 2009 at $87.75 and today it closed at 158.12. SLV was featured in our April 2009 letter at $12.85 and again in our June 2010 letter at $18.03. We again featured it in our January 2011 letter at $30.18. It closed this month at 29.07. Those purchasing either �� for the last year or two. We will continue to add either or both to all new portfolios as we navigate through these times of uncertainty. Although bought as defensive portfolio protectors, as one can see, they both continued to increase in value while stock prices continued to appreciate in 2009 and 2010. We believe this pattern will continue throughout 2011 and ongoing. Our strategy of safety, remaining defensive, and purchasing value remains paramount for the foreseeable future.

DP

ETFs:GoldSilver

Toll Free: (800) 510-0329

Copyright © 2007 Pearson Capital, Inc. - All Rights Reserved - Sources: Pearson Capital, Inc. research, various publications and the InternetSource Rating Key for PCI’s featured stocks: Pearson Investment Growth Rating measures long-term past and future growth.

Pearson Value Rating measures current value in terms of potential for the dollar. Investors Business Daily measures growth and relative price strength.S&P measures � nancial quality and growth potential. Value Line measures timeliness, value and safety.

Information & data obtained from other sources is believed to be reliable, but its accuracy and completeness can not be guaranteed.Walter Pearson is the former President of First New England Securities, Co., Inc. and at that time, also managed the Statistical Department.

He is the author of the book, “Investing for the Millions” and Publisher Emeritus for the Pearson Investment Letter.At this time, Mr. Pearson is Chairman of the Board of Pearson Capital, Inc.

He is a contributing columnist for various publications and is listed in Who’s Who in America. “Remember the Lord your God, for it is He who gives you the ability to produce wealth. Deut. 8:18”

WALTER’S WISDOMwww.pearsoncapitalinc.com

INVESTORS AND NON-INVESTORS Have you ever given a thought to the difference in feelings that investors have and non-investors do not? When the market goes down, investors are usually depressed on minor dips and may even be shattered on the major ones, whereas the non-investors will continue in their daily routine completely unaware. One of the things the seasoned investor has learned is that tomorrow is another day and the bad news of today may very well change by this time tomorrow. The seasoned investor is aware that some things work out right away, other things may take a while, and some things may not work out at all. Living one’s life is much the same as investing in the stock market. Some things you have done right and some things may have gone wrong.

What should all this mean to the investor? It simply means that no one is perfect and mistakes will be made when investing. But, whether the investor is a client or not, he should exercise his patience, sometimes to the extreme. On one occasion I bought a stock for myself, and one year later bought the same stock for a client at pretty much the same price. I was a bit upset that she paid no more than I had and this was after a whole year. However, in another six months the stock had doubled in price, which gave me 100 percent in a year and a half but for her it took only six months. Sometimes it seems like the stock market is screaming to investors that market prices are not a true indicator of value. One day McAfee was selling 57 percent cheaper than the going price the next day. What happened? Intel decided that they wished to own that company. After considering everything, they decided that it would cost that much if they were trying to buy it in the regular marketplace; so they made the company an offer, and whether or not it is accepted, the market price has appreciated that much and there it will stay for some time to come. Strangely enough it could very well be that the market price of a stock is well beyond what the stock is actually worth.

It is important to think positive. Look on the bright side. Think of those people who bought McAfee yesterday. Some may be crying because they didn’t buy enough shares, and others may complain because they bought something else. Those who bought should be happy that they participated and those who bought something else should be happy that their purchase didn’t go down 57 percent. Positive thinkers will see the stock market as the only place to be these days. Years ago one might invest in bonds for safety and income. Not today. In! ation has made bonds a no-no. If in! ation is only at a 5 percent rate, it still � gures out to bonds being guaranteed losers. If on the other hand in! ation is at an 8 or 10 percent rate (I believe these � gures are more accurate), it becomes a non-safe place for bonds. I believe that they should not be considered for anyone’s portfolio.The nice thing about today’s marketplace is there are a few companies that look to be solid companies that are paying dividends that � gure out to a 6 percent yield or better. Some of them have increased their dividends each year. Timing is nice to think about, but is very hard to do. You might have considered some of these companies, but if you have a professional handling your investments, you don’t even have to think about it. The professional investor should already have taken these things into account. In other words, if you already have us doing your thinking for you, you may go in for a dip in the ocean or some other bit of frivolity. We will be sitting at the computer doing your work for you and hopefully doing a better job.

As an investor you should realize that sometimes the market is high and sometimes it is low, and it is dif� cult to differentiate at times. However, I do have this to say: I do believe that there are some excellent buys in the marketplace at this time, and I strongly suggest if you are one of our clients that you endeavor to add cash if you can. If you are like me, you will be unable because I keep fully invested at all times.

Remember the saying: Patience is a virtue. You send the money; we’ll be virtuous! WP

Toll Free: (800) 510-0329

AVON PRODUCTS INC (AVP) NYSE PRICE: $19.60

Institutional Holdings: 1333Industry: Personal & Household Prods.

PHILIP MORRIS INTERNATIONAL INC (PM) NYSE PRICE: $62.38

Institutional Holdings: 2704Industry: Tobacco

Earnings per share

WALT DISNEY CO (DIS) NYSE PRICE: $30.16

Institutional Holdings: 2260Industry: Broadcasting & Cable TV

CSX CORP (CSX) NYSE PRICE: $18.67

Institutional Holdings: 1501Industry: Railroads

Earnings per share

Philip Morris International Inc. (PMI) is a holding company. PMI, through its subsidiaries and af� liates and their licensees, is engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. As of December 31, 2010, its products were sold in approximately 180 countries. Its portfolio comprises both international and local brands, which include Marlboro, Merit, Parliament, Virginia Slims, L&M, Chester� eld, Bond Street, Lark, Muratti, Next, Philip Morris and Red & White. PMI also owns a number of local brands, such as Sampoerna A, Dji Sam Soe and Sampoerna Hijau in Indonesia, Fortune, Champion and Hope in the Philippines, Diana in Italy, Optima and Apollo-Soyuz in Russia, Morven Gold in Pakistan, Boston in Colombia, Belmont, Canadian Classics and Number 7 in Canada, Best and Classic in Serbia, f6 in Germany, Delicados in Mexico, Assos in Greece and Petra in the Czech Republic and Slovakia.

PEARSON CAPITAL’S RECOMMENDED STOCKS FOR OCTOBER 2011www.pearsoncapitalinc.com

Avon Products, Inc. (Avon) creates, manufactures and markets beauty and non-beauty-related products. The Company’s product categories are Beauty, Fashion and Home. Beauty consists of color cosmetics, fragrances, skin care and personal care. Fashion consists of fashion jewelry, watches, apparel, footwear, accessories and children’s products. Home consists of gift and decorative products, housewares, entertainment and leisure products and nutritional products. Its international operations are conducted through subsidiaries in 63 countries and territories outside of the United States. In addition to these countries and territories, its products are distributed in 41 other countries and territories through distributorships. In July 2010, the Company completed the acquisition Silpada Designs, Inc. (Silpada), a direct seller of jewelry products, primarily in North America. In March 2010, the Company completed the acquisition Liz Earle Beauty Co. Limited (Liz Earle).

Ratings & Recommendations

Current P/E Ratio: 11.5 Annual Yield: 4.6%Annual Dividend: $0.92Investor’s Bus. Daily: D Pearson Growth & Value: AMorningstar Rating: AStand & Poor Rating: B-The Street (analyst avg.): B-

Type: ValueSector: Consumer/Non-Cyclical

Earnings per share


Current P/E Ratio: 14.2Annual Yield: 4.8%Annual Dividend: $3.08Investor’s Bus. Daily: A+ Pearson Growth & Value: A- Morningstar Rating: CStand & Poor Rating: A The Street (analyst avg.): A-

Type: Value Sector: Consumer/Non-Cyclical

The Walt Disney Company, together with its subsidiaries, is a diversi� ed worldwide entertainment company. The Company operates in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media. The Company has a 51% effective ownership interest in Disneyland Paris, a 5,510-acre development located in Marne-la-Vallee, approximately 20 miles east of Paris, France. The Company manages and has a 40% equity interest in Euro Disney S.C.A. The Company holds an 18% equity interest in The Active Network, Inc. The Company owns a 47% interest in Hong Kong Disneyland Resort through Hong kong International Theme Parks Limited. On December 31, 2009, the Company completed an acquisition of Marvel Entertainment, Inc. (Marvel). On March 31, 2010, the Company acquired Retail Networks Company Limited. On August 27, 2010, the Company completed the acquisition of Playdom, Inc.


Current P/E Ratio: 12.8Annual Yield: 1.3%Annual Dividend: $0.40Investor’s Bus. Daily: D Pearson Growth & Value: A Morningstar Rating: BStand & Poor Rating: AThe Street (analyst avg.): B

Type: ValueSector: Services

Earnings per share

CSX Corporation (CSX) is a transportation supplier. The Company provides rail-based transportation services, including rail service and the transport of intermodal containers and trailers. CSX’s principal operating company, CSX Transportation, Inc. (CSXT), provides a link to the transportation supply chain through its approximately 21,000 route mile rail network, which serves population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec. It serves over 70 ocean, river and lake ports along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. CSXT also serves thousands of production and distribution facilities through track connections to more than 240 short-line and regional railroads. It transports utility, industrial and exports coal to electricity-generating power plants, steel manufacturers, industrial plants and deep-water port facilities.


Current P/E Ratio: 12.1Annual Yield: 2.5%Annual Dividend: $0.48Investor’s Bus. Daily: C Pearson Growth & Value: AMorningstar Rating: AStand & Poor Rating: B The Street (analyst avg.): B

Type: ValueSector: Transportation

3.874.76 5.21 5.75

0.00

2.00

4.00

6.00

8.00

2010 2011 2012 2013EstimatedEstimated

2.072.49

2.913.34

0.00

1.00

2.00

3.00

4.00


1.351.72

1.982.31

0.00

0.50

1.00

1.50

2.00

2.50


1.80 2.03 2.262.55

0.000.501.001.502.002.503.00


Toll Free: (800) 510-0329

ZIX CORP (ZIXI) NASDAQ PRICE: $2.67

WATERS CORP (WAT) NYSE PRICE: $75.49

WAL-MART STORES INC (WMT) NYSE PRICE: $51.90

PEARSON CAPITAL’S RECOMMENDED STOCKS FOR OCTOBER 2011www.pearsoncapitalinc.com

TARGET CORP (TGT) NYSE PRICE: $48.96

Target Corporation (Target) operates Target general merchandise stores with an assortment of general merchandise and food assortment. Its expanded food assortment includes some perishables and some additional dry, dairy and frozen items. In addition, it operates SuperTarget stores with general merchandise items and a full line of food items. Target.com offers an assortment of general merchandise, including many items found in its stores and a complementary assortment, such as extended sizes and colors, sold only online. It operates two segments: Retail and Credit Card. The Retail segment includes all of its merchandising operations, including its integrated online business. The Credit Card segment offers credit to quali� ed guests through its branded credit cards, the Target Visa and the Target Card. In addition, it offers a branded Target Debit Card (collectively REDcards). As of January 29, 2011, it had 1,750 stores in 49 states and the District of Columbia.

Current P/E Ratio: 22.3Annual Yield: 2.4%Annual Dividend: $1.20Investor’s Bus. Daily: B Pearson Growth & Value: A- Morningstar Rating: BStand & Poor Rating: The Street (analyst avg.): B


Current P/E Ratio: 4.1 Annual Yield: 0%Annual Dividend: $0Investor’s Bus. Daily: B Pearson Growth & Value: A Morningstar Rating: N/AStand & Poor Rating: N/AThe Street (analyst avg.): B

Waters Corporation (Waters) is an analytical instrument manufacturer. Through its Waters Division, Waters designs, manufactures, sells and services, high-performance liquid chromatography (HPLC), ultra performance liquid chromatography (UPLC and together with HPLC, referred to as LC) and mass spectrometry (MS) instrument systems and support products, including chromatography columns and other consumable products, and post-warranty service plans. Through its TA Division (TA), the Company primarily designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments. The Company is also a developer and supplier of software-based products that interface with the Company’s instruments, as well as other manufacturers’ instruments. Waters operates in two segments: Waters Division and TA Division.


Current P/E Ratio: 16.9 Annual Yield: 0%Annual Dividend: $0Investor’s Bus. Daily: B Pearson Growth & Value:AMorningstar Rating: BStand & Poor Rating: BThe Street (analyst avg.): B

Type: GrowthSector: Technology

Institutional Holdings: 1108Industry: Scienti� c & Technical Instr.

Earnings per share

Wal-Mart Stores, Inc. (Walmart) operates retail stores. The Company operates in three business segments: Walmart U.S., Walmart International and Sam’s Club. During the � scal year ended January 31, 2011 (� scal 2011), the Walmart U.S. segment accounted for 62.1% of its net sales, and operated retail stores in different formats in the United States and Puerto Rico, as well as Walmart’s online retail operations, walmart.com. The International segment consists of retail operations in 14 countries. During � scal 2011, the segment generated 26.1% of the Company’s net sales. The International segment includes different formats of retail stores and restaurants, including discount stores, supercenters and Sam’s Clubs that operate outside the United States. The Sam’s Club segment consists of membership warehouse clubs in the United States and Puerto Rico, and the segment’s online retail operations, samsclub.com. During � scal 2011, Sam’s Club accounted for 11.8% of its net sales.


Current P/E Ratio: 11.8 Annual Yield: 2.8%Annual Dividend: $1.46Investor’s Bus. Daily: A- Pearson Growth & Value: A Morningstar Rating: BStand & Poor Rating: AThe Street (analyst avg.): B

Type: Value Sector: Services

Institutional Holdings: 2663Industry: Retail (Department & Discount)

Earnings per share

Zix Corporation’s (ZixCorp) is engaged in the operation of Email Encryption Services. ZixCorp’s Email Encryption Services enable the use of secure e-mail for sensitive information exchange primarily in the healthcare, � nancial services, insurance and government sectors. The Email Encryption Services allow an enterprise to use policy-driven rules to determine, which e-mails should be sent securely to comply with regulations or corporate policy. It is primarily offered as a Software-as-a-Service (SaaS) solution, for which customers pay an annual service subscription fee. The Company’s Email Encryption Services provide a user to deliver encrypted e-mail to any e-mail user at any e-mail address by using the ZixCorp Best Method of Delivery protocol that determines the direct and right means of delivery, based on the sender’s and recipient’s communications environment and preferences.

Institutional Holdings: 1908Industry: Retail (Department & Discount)

Earnings per share Ratings & Recommendations

Type: Value Sector: Services

Type: GrowthSector: Technology

Institutional Holdings: 138Industry: Computer Services

Earnings per share

3.303.88 4.22 4.34

0.00

1.00

2.00

3.00

4.00

5.00


3.66 4.07 4.49 4.89

0.001.002.003.004.005.006.00


4.094.81 5.40

6.09

0.00

2.00

4.00

6.00

8.00


0.11

0.160.20

N/A0.00

0.05

0.10

0.15

0.20

0.25


Toll Free: (800) 510-0329

ISHARES SILVER TRUST (SLV) NYSE ARCA PRICE: $29.07

PEARSON CAPITAL’S RECOMMENDED ETFS OCTOBER 2011www.pearsoncapitalinc.com

SPDR GOLD TRUST (GLD) NYSE ARCA PRICE: $158.12

The investment seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.

The objective of the investment is to re! ect the price of silver owned by the trust less the trust’s expenses and liabilities. The fund is intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver. Although the fund is not the exact equivalent of an investment in silver, they provide investors with an alternative that allows a level of participation in the silver market through the securities market.


Current P/E Ratio: N/A Annual Yield: 0%Annual Dividend: $0Investor’s Bus. Daily: N/A Pearson Growth & Value: AMorningstar Rating: N/AStand & Poor Rating: N/AThe Street (analyst avg.): N/A

Performance by%

Location: GlobalType: 100% Other

Category: CommoditiesIndustry: Precious Metals

Management Fee:Our fee is extracted quarterly from the account at 25% of one percent by TD Ameritrade. Immediately following any

quarterly management fee extraction, it is posted within your account’s history information available on line. It is also posted in your TD Ameritrade monthly statement.

Fourth Quarter October-November-December-see your October statement.


Current P/E Ratio: N/A Annual Yield: 0%Annual Dividend: $0Investor’s Bus. Daily: N/A Pearson Growth & Value: AMorningstar Rating: N/AStand & Poor Rating: N/AThe Street (analyst avg.): N/A

Performance by%

Location: GlobalType: 100% Other

Category: CommoditiesIndustry: Precious Metals

5.00

24.0029.70

1.000.00

10.00

20.00

30.00

40.00

2008 2009 2010 YTD

(24.0)

47.30

82.10

16.20

0.00

20.00

40.00

60.00

80.00

100.00

2008 2009 2010 YTD

Roth IRAEvery so often I write about a Roth IRA because I know that everyone who quali� es should have one. You can have a 401k, and other tax-free accounts. The Roth is merely the holder of the assets selected; they will continue to grow tax free until taken out. What better way to save for your retirement? To qualify you simply need to meet the following requirements: Make less than $179,000 gross income if you are married, or $122,000 if you are single. A Roth also offers more ! exibility compared to a Traditional IRA. You can withdraw contributions (but not earnings) any time tax-free and penalty free. With a Traditional you must begin removing the assets (converted to cash) at age 70 and a half. A formula has been laid out by the Federal Government predicated on your yearly age and the account value as of the last day of the prior year. When this money is taken, the IRS is noti� ed and this “required minimum distribution” becomes taxed as ordinary income. Depending on how much you are making in retirement, this will push up your income and perhaps place you into a higher taxable bracket. A Roth does none of this. There are no required minimum deductions, and you can take from it at your convenience, or leave it for your heirs. The maximum contribution at this time is $5,000 annually for those below 50 years of age, and $6,000 for those 50 years of age or higher. Here’s another consideration in a market that is on the decline. When you convert a Traditional IRA to a Roth, you pay income tax on the entire amount converted. If your account has fallen enough in value and you believe this merits consideration, perhaps you might split your account into two different Roths. One more risky than the other, and if it continues to fall after the conversion, you can undo or “re-characterize” either one back into a Traditional IRA.

If you would like to discuss this as it pertains to your account, please call me at your convenience.

WALL STREET INDEXESP.O. Box 3739

Apollo Beach, Florida 33572��#�'*�+<�=>��@�[\[\]�^#�'*�+<�=>��@�[[\\

Toll Free: (800) 510-0329

President Donald E. Pearson

E-mail: [email protected]

Chairman Of The BoardHead Of Investment Research

Walter D. PearsonE-mail: [email protected]

www.pearsoncapitalinc.com

Stock Analyst Chris Carothers

[email protected]

Table of Contents

Editor Roberta Wilde

The Pearson Investment Letter published monthly since 1982

Services Provided

Managed Accounts: Individual - Joint - Custodial

Corporate - Partnership - TrustIRA’s; Roth - Trad - College - SEP

401(k) & 403(b) Rollovers - Transfers

Free consultationNo hidden fees

Management fee of 1% annuallyfor accounts of $25,000 or more

(2% for smaller accounts)

Privacy PolicyAvailable online or mailed upon request.

Pearson Capital, Inc.

Christopher Carothers - PCI’s Stock AnalystMARKET VIEW

S&P 500

Dow Jones

Nasdaq

Indexes

Account Manager Ann Hathaway

[email protected]

2008 20102009

Market Average

2005 2006 2007 YTD

www.pearsoncapitalinc.com

3.0%

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1.4%

1.8%

�+�=_

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9.5%

14.1%

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9.8%

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(40.0%)

(33.4%)

(42.1%)

(38.4%)

23.5%

18.8%

43.9%

27.9%

12.9%

11.0%

�=��_

13.8%

Economic Flows: Operation Twist is a new wrinkle on how the Federal Reserve is tackling the problem of jump starting the

depressed U.S. economy. It is also mandated by Congress to participate in the government’s ill-fated efforts in helping to create jobs. Chairman Ben Bernake had made the leadership decision in this case by overriding dissensions from three other Fed governors. This is extremely rare for the Chairman to make a move without major support. Operation Twist has the Fed selling short-term treasuries and buying long term ones in their place in order to meet its goal of lowering long-term rates. The intention is that lower long-term rates would help increase the demand for mortgages ��`�� {�� every investor has become very nervous and is moving everything into money markets or cash accounts, waiting for higher yields that will not arrive in the near term, or at least as noted by Bernake - 2013. The Fed is also helping the EU work out the structural issues facing Europe that limit its ability to stop their escalating sovereign and banking crisis. Many critics see these actions as doing more harm than good, as the Western economies continue to de-leverage from their credit binge. It is my opinion that the Fed is using these investors’ deposits to leverage its agenda.

Key Point: We will see if Operation Twist does anything to help the economy.

Earnings Flows:October begins third quarter earnings season and helps predict the end of the year. Earnings should come in at or above expectations, but at the same time there are worries about a major slowdown for the fourth quarter, with some economists predicting a negative growth rate. Operation Twist will cause problems for many major corporations and insurance companies that depend on the long-term bonds to generate income. Many companies’ pension plans have a large amount of long-term treasuries to help provide long term funding. So, if interest rates do go lower, expect the Fortune 500 to scramble to replenish the accounts to try to make up for the shortfall. This action will affect short-term earnings. Traditionally, this season is the best season for stock returns, and I hope that current events will not stop earnings from continuing their upward trend. However, investors are becoming more realistic.

Key Point: Operation Twist may affect earnings for Fortune 500 companies.

Cash Flows: Productivity is climbing with leading companies still building up their cash reserves, as with the recent announcement of Berkshire Hathaway’s (BKR.B) offer to buy its own stock. Its management sees in its near term future very slow growth and very few buying �� |�� ̀ ��̀ ��|�� |�� for decades that they would not do it. To me this is the part of a major trend that affects corporate management worldwide - the world’s growth is slowing. In order to seek value for its shareholders, they are going to focus on total return, with dividends, and stock buybacks to increase shareholder value. We want to align ourselves with managements who have this same objective rather than focus on growth. We are also seeing companies �� {�� }��|��'{}<�� CEO, Leo Apotheker. He is walking away with more than $13 million in cash and stock ��|�� ~�`�� ~�� Meg Whitman, who, previously from Ebay, will also wish to have a very large pay package.

Key Point: We are starting to see companies focusing on total return. Please note: 1. Europe is starting to work out its problems.2. We will be seeing value in bank stocks as they work out their structural debt.3. More companies are returning cash to shareholders.

Walter’s Wisdom: 2

Featured Stocks: 3

Featured Stocks: 4

Featured ETFs: 5

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(5.7%)

(9.1%)

(8.3%)

FEATURED STOCKS - OCTOBER 2011Copper is used whenever possible simply because of the difference in...

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